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NeuroTactic Overview

Prospect Theory

A painful experience is more powerful than a gain of equal measure

SUMMARY:

If you were given $10 by a random stranger on the street, you would probably feel good. But if someone ran up to you a few seconds later and stole the $10 bill out of your hand, you would feel worse off than you did before you received the $10 in the first place, even though you are no worse off. This is called Prospect Theory.

We feel more pain from a loss than we feel from a gain of equal value. In fact, we take more risks to avoid pain than we do to achieve an equal gain. And as we gain more, we value each of the same types of gain less and less (this is called Diminishing Marginal Utility). This behavior affects everything from our purchasing decisions to our relationships.

Consider bundling together the “painful” elements of your product. Offer annual subscriptions instead of monthly or bundle services together that you know would otherwise be purchased separately. When planning your customer journey, try to add time between benefits, such as limiting the use of your product to a certain frequency or spreading out rewards in your loyalty program.

Primary Source:

Kahneman & Taversky (1979). Prospect Theory: An analysis of decision under risk. Econometrica, Vol. 47, No. 2, pp 263-292

Dream Category:

Desire

The DREAM framework, created by Vivid Labs, represents a research-backed framework for effective marketing messages. It stands for Desire, Routing, Emotion, Attention, and Memorability.

AIDA Category:

Decision, Action
AIDA is a well-known framework for assembling a marketing message. It stands for the four steps of human decision-making: Attention, Interest, Decision, and Action.

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